FARMINGTON – Additional counties and municipalities are claiming the New Mexico state tax agency did not collect and disburse tax revenue fairly, as a lawsuit against the state moves forward.
The city of Farmington was one of the original local governments that brought the case when it was first filed in late 2018, said city attorney Jennifer Breakell. Since then, a total of 44 counties, municipalities and other local agencies are plaintiffs in the case, she said.
The plaintiffs in the lawsuit are asking the state Taxation and Revenue Department to compensate them for what the cities and counties argue were improper reductions to their revenue over the span of a few years.
Breakell said the city was aware of strange withholdings from the state, and there were years when the city received lower revenue from the state in taxes than was expected. It was not until talking with the New Mexico Municipal League that the city realized there were reports from other counties and municipalities of similarly odd withholdings. William Fulginiiti, executive director of the New Mexico Municipal League, said the total amount owed to the local governments could reach about $100 million.
The revenue in question is from gross receipts taxes, similar to a sales tax, and paid by consumers buying goods and services. The money is normally shared by the state and local governments and disbursed to counties and cities by the state revenue department.
The city of Farmington estimates the initial cost of the callbacks at $1.5 million over a span of at least seven years.
“The real issue is there were a couple of large sums of money withheld,” Breakell said. The plaintiffs say the revenue withheld by the state was intended for city services, including safety services like law enforcement and fire departments, she added.
The lawsuit against the New Mexico state tax agency was filed toward the end of 2018, months before current Gov. Michelle Lujan Grisham’s administration took office in 2019.
In addition to the city of Farmington, Albuquerque, Santa Fe, Las Cruces and Roswell are listed as plaintiffs in the case. While the case is proceeding through discovery and an eventual court date, Breakell said, “hopefully the parties can come together and discuss a settlement.”